Investors were caught off guard by the news that the Australian unemployment rate had dropped from 5.3% to 5.0% in September, although AUD exchange rates failed to capitalise on the data.
Sterling appears to be on the defensive this morning, with GBP/EUR muted at €1.1365, GBP/USD edging down to $1.3349, while GBP/CAD and GBP/AUD holding steady at C$1.7403 and AU$1.7637 respectively. Only GBP/NZD is currently showing any real signs of movement as it tumbles to NZ$1.9039.
Looking to today the focus will be on the US dollar and the Federal Reserve as the bank looks set to implement its second rate hike of the year.
What’s been happening?
The pound struggled to advance once again on Tuesday as the currency found only limited support from some mixed employment figures.
The latest labour report revealed the UK workforce swelled by a further 146,000 workers in April, with the rise being welcomed by GBP investors as it drove domestic employment to strike a new record high of 32.39 million.
However the accompanying wage figures proved to be significantly less impressive as wage growth unexpectedly fell back from 2.9% to 2.8%.
The pound was able to rally at the end of the session however as the UK government won a crucial vote in the House of Commons, with the passing of the EU withdrawal bill coming as a relief to markets who feared further disruptions to Brexit if the bill was defeated.
Meanwhile the GBP/EUR exchange rate slid to a new one-month low yesterday, as the pairing suffered in the run up to the European Central Bank’s (ECB) policy meeting on Thursday.
The gains in the euro also came despite a fairly bleak outlook for the Eurozone’s growth prospects over the next six months, with the Eurozone’s economic sentiment index, plummeting in June over concerns US trade tensions will drag on the bloc.
Finally the GBP/USD exchange rate, after a brief spike, closed Tuesday near the session’s opening levels.
This was partly driven by the release of the latest US consumer price index, which revealed US prices accelerated at their fastest pace in over six years as inflation forged ahead from 2.5% to 2.8% in May.
What’s coming up?
Looking ahead, the UK will publish its own CPI figures later today, with the pound possibly strengthening if inflation rebounds in line with expectations in May.
Meanwhile the euro may be forced to relinquish some ground this afternoon as the Eurozone’s latest production figures are forecast to report a downturn in industrial output in April.
However the focus for today will undoubtedly be on the US dollar, with the Federal Reserve widely forecast to raise interest rates today. However, with the move long since priced in, it will be the bank’s forward guidance which is likely to prompt the greatest response from investors.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)